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Western developed economies have been resorting to almost every possible trick they can conjure up to maintain financial stability and economic growth over the last few years.

And while stimulus, interest rate cuts, monetary easing, currency swaps, liquidity operations, bailout/austerity programs, bank "re-capitalizations", loan guarantees, entitlement/welfare programs, data manipulation, etc. have kept them muddling through so far, the undeniable truth is that there will SOON come a time when none of those things makes the least bit of difference anymore.

For instance, Morgan Stanley just produced a report which concluded that the euphoric market effects of quantitative easing, the most potent monetary weapon possessed by CBs, may only last a few HOURS or DAYS, rather than weeks or months.

This concept should be so familiar to readers of TAE by now that I don't even need to link to any of our articles for reference. Here's the bottom line - the U.S. population is still saturated with consumer, housing and business debts, as well as unserviceable public debts at the local/state level, and the deleveraging cycle is once again gaining momentum on the back of the Eurozone crisis.

And that means no amount of cheap liquidity will be able to substitute organic economic growth with artificial growth on paper. If monetary easing cannot even manage to temporarily juice housing data, jobs data, retail sales data, consumer sentiment data, manufacturing data, etc., then the big market players no longer have anything to hang their hats on.

Without support for asset prices and corporate profits on paper via leveraged market speculation, most people in the the corporate AND consumer worlds will not feel wealthy, happy and complacent anymore. Thus, the panicked spiral of debt deflation picks up steam once again.

Global macro weakness seems set to trigger another round of global monetary easing. Prior aggressive policy action has coincided with risk asset rallies. However, those policy actions also corresponded with improving macro data, which we think was the critical factor. There will be a Pavlovian reaction from markets if we get further easing, particularly QE3 from the Fed. But if macro stays weak, expect any QE3 rally to last hours or days, not weeks or months.

Macro news is falling short of expectations almost everywhere.

What's at issue now is whether unconventional policy either works to stimulate activity, or can directly boost risk asset prices. We're skeptical on the first point. Deleveraging cycles mute the effect of monetary policy on growth. Unconventional monetary policy may be an effective shield – can defend against systemic breakdown – but not a good sword: broadly unable to encourage a return to normal credit creation, where monetary policy can work to stimulate growth.

Having said that, the important issue for many investors is whether further unconventional easing can trigger a tradable rally in risk assets, even if there is little or no effect on the macro outlook. We're doubtful. When growth is the concern, as now, tradable rallies require better macro news.

Growth concerns, not systemic risk, are now unsettling markets. Investors, rightly in our view, are increasingly skeptical about the ability of unconventional policy to boost growth in developed economies. Certainly, it seems unlikely to counteract fiscal tightening, now under way in Europe and UK, and in prospect in the US. Further easing may trigger an initial market response – there are too many investors who think it works to think otherwise. But without macro improvement, that risk asset rally will be short-lived, in our view.

Over the course of the last year, and [not coincidentally] in concert with the inflection point of credit markets last year, the peanut gallery of pundits has shifted more and more into line with the views of the "gloom & doomers" out there. Morgan Stanley analysts, for example, are now literally telling you the same thing Stoneleigh was telling you three years ago - that QE by the world's largest central bank would eventually fail to overcome the financial and psychosocial forces underpinning the greatest debt deflation to ever occur in the history of human civilization. Three years later and that statement seems almost like a tautology, rather than a matter of opinion.